Third Party Logistics (3PL) in a supply chain management refers to the use of a third party entity that provides services of outsourced logistics to organizations. Over the years the logistics industry has invested in the development of several innovations to advance the supply chain systems, that consist of a set of operations or actions that are carried out from the stage of raw materials supply stage till the product reaches the end consumer. Logistics being the last stage in this process, any kind of bottleneck may cause a delay in the storing, transportation, mismanagement, or inefficiency in the shipping process thereby decreasing the response time of that organization, resulting in monetary loss. Everybody should know the advantages of 3PL Logistics Service Providers in Supply Chain.
The 3rd party Logistics means outsourcing logistical services such as transportation, warehousing or storage to non-related companies not being the consignor of the products. A recent 2017 report by Armstrong & Associates, a leading supply chain consultancy firm, cited that nearly 90% of the Fortune 500 companies in the US rely on 3PL logistics service providers to handle the logistical part of their business. The increasing demand by consumers in the past few years for quick delivery on the doorstep has created huge competition amongst companies across industries that have spiked the need for making the supply chain process expeditious and more efficient.
Advantages of 3PL Logistics Provider in Supply Chain
On that account, certain advantages of contracting a third-party logistics service provider may include:
1. Economical due to reduced costs:
As companies or organizations grow in scale and expand their businesses extra costs of acquiring warehouse management or inventory management and keeping track of the inbound and outbound movement of the products can lead to such companies incurring huge costs. Thus, managing the logistical process in-house is a bigger financial burden than 3PLs which are a much cost-effective option as the companies save money on activities such as the construction of warehouses, hiring of additional workers, and facilitating shipment.
2. Better Response Time:
The 3pl logistics company operates and specializes in shipping services; they control a huge amount of inventory and carry the orders from the warehouse till the next stage. Third-Party Logistics companies are generally regionally based and therefore, have several warehouses set up across places. This makes them well equipped to speedily transport and deliver orders on time.
3. Warehouse and Inventory Management:
The increasing quest for same-day/one-day delivery by customers today require closely sighted inventory management, keeping stock of the products which independent bodies handling logistics would be better equipped to deal with. Customers nowadays love anticipating the arrival of their packages. As a result having a good feature and model to enable such customers to track their packages and thus, maintain transparency and communication is a good practice.
Hiring 3PL services to provide an outlet for businesses to expand into markets they have not yet established themselves in. This is because third party logistics suppliers have warehouses across diverse places and areas that include local and regional places, thereby allowing such businesses to reach into difficult or remote markets and establish their presence without incurring huge costs.
5. Customer satisfaction:
The ultimate success of a business comes from how happy the customers are. This is mainly through having good quality products but also the quality and accuracy of their delivery systems. Hiring a 3rd party logistics company allows such companies to be able to fulfill purchase orders in a methodical and timely manner as these suppliers generally tend to have the latest technology and techniques along with industry expertise that can lower the burden of a business and allow them to invest time in other activities.
Recent Blog: Best Practices for Warehouse Management